How much is too much borrowing?

chriz1000

Hi, i’m 22 and currently trying to fund a business venture, partly from my current business account and savings and partly from credit cards. I currently have 7 credit cards, 4 of which I have applied for over the last year.
My plan is to do a balance transfer from each of the cards over to my MBNA card and then do a final balance transfer from the MBNA account into my current account as they allow bank balance transfers.
My current available borrowing limits of all the cards combined is £62350, ideally I need £75,000 from my credit cards. Would it be better to ring up the card companies and try and get them to increase the limits or to apply for another card? The only thing i'm worried about is the companies seeing how much borrowing I currently have available, is this too much?
I have an additional £102,000 available in savings and from my business account but this is all going towards the fitout. I have a sound buisness plan, the bank can help out, but I would prefer to borrow using credit cards as the costs will be recovered within 12 months and the low interest rates and flexable payback methods seem more appealing.
Any help as to how to approach this situation appreciated.

nmiah786

I had to read your post several times just to get my head round it.

Got to give it to you, you do have some guts and I admire you ambition. I hope you have your finances really worke out to borrow that kind in money on credit cards coupled with your savings of more then £100k.

I know I have no advice to give you but I admire you desire to juggle your business and debt in such a manner.

Good Luck and all the best.

johnsmith_4

chriz1000 wrote:

Hi, i’m 22 and currently trying to fund a business venture, partly from my current business account and savings and partly from credit cards. I currently have 7 credit cards, 4 of which I have applied for over the last year.
My plan is to do a balance transfer from each of the cards over to my MBNA card and then do a final balance transfer from the MBNA account into my current account as they allow bank balance transfers.
My current available borrowing limits of all the cards combined is £62350, ideally I need £75,000 from my credit cards. Would it be better to ring up the card companies and try and get them to increase the limits or to apply for another card? The only thing i'm worried about is the companies seeing how much borrowing I currently have available, is this too much?
I have an additional £102,000 available in savings and from my business account but this is all going towards the fitout. I have a sound buisness plan, the bank can help out, but I would prefer to borrow using credit cards as the costs will be recovered within 12 months and the low interest rates and flexable payback methods seem more appealing.
Any help as to how to approach this situation appreciated.

If you haven't had any credit limit increases on your cards for the last 6 months you should be able to get increases of at least 1000 per card, its unlikely they will check your credit file for a small increase. It wouldn't hurt for you to apply for some new cards anyway. I hope you can keep track of all the interest charges spread around so many places since you can claim these as business expenses. There is no such thing as too much borrowing so long as its being used wisely, which you seem to be doing. I always say if you have £10k debt its your problem but if you have £2,000,000 debt then its the banks problem.

gizmoleeds

£75,000 on credit cards :eek:

You do know that 80% percent of new businesses fail?

You say you have a "sound" business plan - if so then a bank loan would be a far better solution, or investment from a venture capitalist.

You may think I am wrong, but I doubt you will pay off these debts within a year. Be careful - as if there are any hiccups, then the credit card debts' cheap borrowing periods will end and those debts will spiral.

chriz1000

Cheers for the input guys, I will give them a call tomorrow see what they say about upping the limits a little.

Its not really a new business, it’s capital required to open a second centre, I’ve already owned the existing business for 3 years and had experience in the industry for 6 years. Market research shows a major demand for this type of business in the new area with the nearest competition being my other centre located 70 miles away.
The gross profit margin from my existing centre would pay the debit in two years. And the monthly break even point is currently met within the first week of trade.

I understand what your saying, as with any business there are risks, I wouldn’t be able to get a business loan for the full amount as the bank wants to secure money on assists, I don’t yet own my own house and both centres are rented. After many talks with my business bank manager the most they will lend me at this stage is £40,000 and I must take out there payment protection cover as I don’t currently own my own house.
Do you think it’s worth taking this £40,000 loan? Then only using a proportion of the available credit from my credit cards?

Anon

I do hope that you have done your sums - not only in terms of interest (assuming you have managed to get 0%, otherwise very expensive debt) but in terms of keeping sufficient money available from the business to make the minimum monthly payments. You say that you can pay back within 2 years but that means that some of these credit cards are going to be on very expensive debt for at least 15 months (assuming that you have managed to get 0% for the others for a period up to 9 months). With that amount of money on credit cards, you may find that offers for new cards dry up and you then cannot roll the debt, leaving you with significant interest charges. You will also be personally liable for the credit card debts whereas (depending on how you have set up your business) the business may be liable if it all went wrong.

It would be worth getting business/finance advice - perhaps Business Link or some other organisation in your area.

Proceed with caution but good luck.

Anon

chriz1000

Hmmm cheers mate, I see where you are coming from with that. I’m absoulotly sure I have my figures in order for my current buisness. But obviously I’m just predicting figures based on market research for the new centre. I will check out what Buisness Link have to say, but im fairly sure they wont back the credit card idea, but people on here have a much greater understanding of how to make the cards work for you.
I have spoken to all the card issuers, they are all prepared to give me a 0% transfer period or around the 7% mark for the life of the balance.
Doing my sums it may be a safer bet to opt for a life of the balance transfer